South African drivers may soon face another price hike at the pumps, as the government is unlikely to be able to extend the R3 cut in the General Fuel Levy (GFL) for petrol and diesel for much longer.
This comes from Finance Minister Enoch Godongwana, who recently noted that the country is ultimately a price-taker in oil markets and that there is little room to cushion motorists.
“We have to live with the reality that we are price takers as far as oil is concerned. There is nothing we can do about that price,” said Godongwana.
Citigroup’s chief economist for South Africa, Gina Schoeman, has echoed this, noting that South Africa has enough fiscal space to extend the GFL cut by two months at a cost of over R10 billion.
Beyond this point, the government will struggle to provide relief for motorists.
This is notable as the impact of the war and the disruption to the Middle Eastern oil supply may take up to two years to work through the economy, according to Efficient Group chief economist Dawie Roodt.
“It is difficult to say if the relief can be extended at the moment, sitting in Washington. We have offered reprieve until 5 May, beyond that we will have to think again what is available,” Godongwana noted while speaking to 702.
Godongwana is presently in Washington attending a series of meetings with other finance ministers at the International Monetary Fund (IMF) and the World Bank.
He has further indicated that any funding they make available after 5 May will be purely to help South Africans adjust to the higher prices.
Current conversations among ministers in Washington, according to Godongwana, have thus far focused on helping citizens cope with rising fuel prices without putting state finances at risk.
He also indicated that there is no plan for South Africa to seek assistance from the IMF.
“As far as South Africa is concerned, over the past few years, we have built buffers so that we will not rely on the IMF for support in critical times, such as these,” Godongwana said.
“In that regard, we have not come to the conclusion that we are going to be seeking any support from the IMF.”
Strong economic position
While the price hikes at the pumps will hit many South African motorists and businesses hard, the country is faring better than many others on the continent, thanks to having sufficient fiscal buffers to support citizens.
Other African countries already had fuel subsidies that burdened their budgets before the current problem, and with rising oil prices, they cannot afford to increase them to offset the impact.
South Africa’s main advantage is its sophisticated financial system, which allows it to manage the impact of the war on government debt more easily than other African states.
This is primarily due to South Africa’s ability to raise and service debt with its own currency, avoiding the accumulation of debt in foreign currencies.
Thanks to this, the government’s debts are largely isolated from the war’s impact on the exchange rate.
Godongwana has also noted that the National Treasury has been assessing the expected impact on revenue and spending.
In general terms, spending is expected to remain in line with what was outlined in the February budget, while revenue will take a hit.
Loading ...
